2003 (8) TMI 536 - AT - Central Excise

Summary

Issues Involved:
1. Invocation of the extended period for demand of duty alleging suppression.
2. Imposition of penalties under Section 11AC and Rule 173Q.
3. Demand of interest under Section 11AB.
4. Inclusion of amortized cost of moulds in the assessable value of goods.

Detailed Analysis:

1. Invocation of the Extended Period for Demand of Duty Alleging Suppression:
The appellants contested the finding of the Commissioner (Appeals) that there was suppression of fact due to non-disclosure of free receipt of moulds from customers. They argued that the Central Excise Act/Rules do not mandate communication of such aspects to the department. The appellants also cited various case laws, including Chemphar Drugs and Tamil Nadu Housing Board, to support their plea against invoking the extended period of limitation. The Tribunal noted that the appellants had maintained statutory records and provided terms of contracts and price lists to the department. The Tribunal held that the department should have noticed the free supply of moulds at the time of approving the classification and price lists. The Tribunal concluded that mens rea was not established, and there was no intent to evade duty, thus setting aside the demand for the extended period.

2. Imposition of Penalties under Section 11AC and Rule 173Q:
The Tribunal examined whether mandatory penalties under Section 11AC and Rule 173Q were justified. Given the findings that there was no suppression of facts or intent to evade duty, the Tribunal set aside the penalties. The Tribunal referenced the Larger Bench decision in Mutual Industries Ltd., which clarified the inclusion of the cost of moulds in the assessable value, and noted that the appellants had paid duty for the normal period post-judgment. The Tribunal concluded that the imposition of penalties was unwarranted.

3. Demand of Interest under Section 11AB:
The Tribunal also reviewed the demand for interest under Section 11AB. Consistent with its findings on the lack of suppression and intent to evade duty, the Tribunal set aside the order demanding interest. The Tribunal emphasized that the appellants' actions did not constitute suppression of facts, and therefore, the demand for interest was not justified.

4. Inclusion of Amortized Cost of Moulds in the Assessable Value of Goods:
The Tribunal addressed the issue of whether the cost of moulds should be amortized based on the actual number of moulded components manufactured or the potential number that could be manufactured. The Tribunal upheld the Larger Bench's decision that the cost should be spread over the potential number of components that could be produced. The Tribunal found the Commissioner (Appeals)'s reasoning valid and upheld the inclusion of the amortized cost of moulds in the assessable value.

Conclusion:
The Tribunal modified the impugned order, setting aside the demand for duty for the extended period, the imposition of penalties under Section 11AC and Rule 173Q, and the demand for interest under Section 11AB. The Tribunal upheld the inclusion of the amortized cost of moulds in the assessable value as per the Larger Bench's decision. The appeal by the Revenue was dismissed, and the appeal by the assessee was partially allowed.